RE: Ian Tam writesSursumcordableb,
I advise that you be very careful with interpretation of "Book-Value" in the case of (example) Energy based exploration and operating particular company. I have a lot of trouble with application of the statement "that book value measures what the theoretical value of a company's equity should be if the company is liquidated".......
Just consider the difference in recorded book value between a company that invests (say) $5 million in finding and drilling a well and the take-over value that would be "assigned" to that well if the well was taken-over by another entity on well completion......if the well was operated by the original exploration and development company the full value of the discovered reserves in the ground would not appear in book-value(the investment to discover and develop would appear), but would be gradually recognized in the operations of the company as they are lifted to the surface and sold. In the case of a take-over the the well would be assigned the fuller value of the discovered reserves in the ground and "this portion of full value would be immediately(upon completion of the take-over) reflected in book-value of the successful taking-over company....... that can reflect huge difference in the recorded book-value of the same well,
Peace,
Good decision-making to All,
ElJ